The New Zealand dollar fell to its lowest in more than five months and the Australian dollar shed half a US cent on Thursday, following a soft survey reading of China's manufacturing activity and a hawkish-sounding Federal Reserve. The kiwi was at $0.8352, its lowest since early March, while the Australian dollar looked feeble at $0.9250, having shed 0.4 percent on the day. The latest blow came from a soft reading of China's vast factory sector. The Antipodean currencies are sensitive to news out of China, a key export market.
Both currencies had already been under pressure after investors detected a hawkish turn in policy discussions at the US Federal Reserve, giving a fillip to the US dollar. The New Zealand dollar dropped as far as $0.8347 and is not expected to see any relief as local data has pointed to slowing momentum, key commodity prices have fallen and the central bank has paused its rate rises likely until the end of the year.
"Markets are selling the kiwi on the twin factors of a lack of domestic support for a move higher, and stronger US dollar," said ANZ senior currency strategist Sam Tuck. Near term support for the kiwi is seen initially around $0.8340, the year to date low, but more substantially at $0.8280. The previous $0.8400 support level was now the first hurdle higher.
Across the Tasman Sea, the Aussie slipped as far as $0.9235, after stops around $0.9250 were triggered. Against its kiwi neighbour, the Aussie dollar managed to climb to a nine-month high of NZ$1.1101. Australian government bond futures fell in sympathy with US Treasuries following the Fed minutes. The three-year bond contract shed 7 ticks to 97.300, while the 10-year contract lost 7.5 ticks to 96.510. The premium offered by Australian 10-year bonds over US Treasuries last stood at 108 basis points, from a trough of 89 basis points hit last month. New Zealand government bonds had an offered tone, sending yields up to 5.5 basis points higher.